Good investment to keep and rent?

Question

I am in the military located about 15 min from fort Stewart. I bought a new build. 4bds 2.5 baths, 2160 SF on a six acre lot in a neighborhood. I am thinking about renting this property when the army moves me. For the first few years I have no cash flow and am just breaking even. At about year 3 to 5 I am projected to start cash flowing a decent amount. The area I'm living in used to be more rural but is being built up a ton with residential homes. Reaching out to see if people think this is a good idea even though it does not meet the 2% rule right away. Any thoughts are appreciated. Thinking about buying at every duty startion I'm at and then renting out when I move.

Drew Sygit · Answer

So, $2400 Rent - 10% PMC - 10% MNT => $1920

$1920 - $1906 PITI = $14 potential positive cashflow.

NOTE: you really need to find out how much your property taxes may change AND your home insurance when you change to rental policy.

Drew Sygit · Answer

Thanks.

#4. Call the city assessor office

So, it appears you would rent out at negative cashflow > $1500 Rent - $1906 PITI = -$406.Then you'll have PMC expenses, maintenance, vacancy, etc., making it worse.

How will you be able to afford that?Why would you want to pay that?

May be better to sell this property and buy more wisely when Army transfers you.Buy a fixer-upper instead of a "pretty, move-in ready" house.

You'll need to get your wife onboard with that!

Drew Sygit · Answer

6 acre lot?Not something that typically generates a high rental ROI.

You may need to niche-market it to maximize the rent.- Who would pay the most for a house on a 6 acre lot?

You may also want to look into if your lot is splitable, so portions could be sold to builders in the future.

Lastly, how long until Army moves you?Family situation?- you may want to househack and rent out vacant bedrooms, also explore MTR & STR options for vacant bedrooms.

Renting out vacant bedrooms will:- Give you some hands-on PM experience- Generate extra income that you can use to build reserves, paydown unsecured debt, etc.

Thinking about buying at every duty startion I'm at and then renting out when I move. Great idea, many here on BP have done so.

Challenge will be buying houses that will be "bread & butter" rentals with high ROI vs houses you personally prefer to live in.

Dave Foster · Answer

@Placeholder Placeholder, If you chose to just sell the property, you could take the first $500k of the gain tax-free since you're married, as long as youve lived in the property for two out of the previous ten years, because they give our military members an additional five years to take advantage of the primary residence exclusion.

If you decided to rent out the property, you would still have plenty of time to take advantage of the primary residence exclusion if you choose to sell the property later on. In addition to that, you would also qualify to do a 1031 exchange because you would be converting the property to an investment. This means that if there are any additional capital gains tax after the exclusion, or depreciation needing to be recaptured, you could defer the rest in a 1031 and reinvest it into another investment property. Even if you don't use the exclusion, you could do a 1031 exchange and defer all of the tax if you ever choose to sell.

Corby Goade · Answer

Six acres? Sounds like a maintenance nightmare.

I'd sell it and use the proceeds to buy lower maintenance rental properties. Since it was your primary, you should be exempt from capital gains, just move that equity to something that will be more passive and have better ROI.

Bo Smith · Answer

Military moves are perfect for this strategy since you're moving anyway. Find a solid property manager before you PCS, even if it cuts into early cash flow - you don't want tenant calls at 3am from Germany. Started looking at property management companies yet?

Jacob Bochonok · Answer

@Bo Smith yes I have called a few. Is there a good way to determine who is the best besides reviews?

Jacob Bochonok · Answer

1. I owe 267,555

2. Currently appraised at 345,000

3. PITI= 1,906

4. Im not quite sure, where would I go to find this info?

5. for similar houses 1,300 to 1,500.

6 Acre lot: the usable lot space is about an acre, the other 5 is protected marsh land/woods.

the army will move me in about 1.5-2 years from now.

I am married and have two kids.

we have one Vacant room but i know my wife will not want a tenant sleeping next to the kids/sharing common space with us.

Jacob Bochonok · Answer

@Drew Sygit I am so sorry. Rent would be 2300 to 2500. Mortgage is still 1906.

thank you for the tip with the city assessors office.

Bo Smith · Answer

Military moves set you up perfect for long-term holds. Track rent comps every 6 months in growing areas - they usually surprise you with faster growth than expected. Self-managing from your next station or using a property manager?

Good investment to keep and rent?

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